[00:00:00] Speaker 05: For argument to 171448, Macomb Technology versus Asian. [00:00:58] Speaker 05: Before we begin, I just wanted to address a council question, just to make sure we're all on the same page with respect to confidentiality and what we can and can't talk about here and otherwise. [00:01:09] Speaker 05: And it gets a little confusing because there's a lot of confidential marking in the appendices, but it seems to me, so I want you to clarify if I'm wrong, that there is [00:01:20] Speaker 05: pretty close to very little, if anything, in the briefs themselves. [00:01:24] Speaker 05: And most particularly, what I'm interested in is whether or not it's non-confidential for us to refer to the agreement itself in the various provisions, some of which are incorporated in the injunction. [00:01:38] Speaker 04: That's fine. [00:01:38] Speaker 04: It's Mekong's position that the entirety of the license agreement can be public. [00:01:43] Speaker 04: And Finian had a different view. [00:01:45] Speaker 00: The terms of the license agreement are confidential under the confidentiality provisions in the license agreement and so the definitions we have asked to be kept company. [00:01:57] Speaker 05: I'm looking at blue here and I've got the confidential version but I looked at the non-confidential version and I didn't see anything that was [00:02:08] Speaker 00: Yeah, Section 2.1 is not confidential. [00:02:12] Speaker 00: So that's the focus in the briefs, is the language of Section 2.1. [00:02:16] Speaker 00: Definitions of exclusive field, that's confidential. [00:02:21] Speaker 05: Oh, I saw those marked, I think, in red, but I didn't see them. [00:02:25] Speaker 05: Are those contained in your brief? [00:02:27] Speaker 05: I don't believe they're contained in the brief, Your Honor. [00:02:29] Speaker 05: I'm sorry, you said? [00:02:30] Speaker 05: I do not believe they're contained in the brief. [00:02:33] Speaker 05: What we've got here is, as I said, I didn't see any particular markings here. [00:02:37] Speaker 05: But there are confidential markings in the appendices, which go way beyond. [00:02:41] Speaker 05: I mean, stuff that you've let out publicly here is marked confidential in the appendices. [00:02:47] Speaker 05: Do you understand what I'm talking about? [00:02:48] Speaker 05: But the agreement is all open, right? [00:02:53] Speaker 05: OK. [00:02:53] Speaker 05: All right. [00:02:53] Speaker 05: Thank you. [00:02:54] Speaker 05: Sorry. [00:02:55] Speaker 05: Won't be counted against your time. [00:02:57] Speaker 05: Mr. Wiley, why don't you come up and proceed. [00:03:03] Speaker 00: May it please the court, David Willey for the Infineon entities. [00:03:08] Speaker 00: I would like to begin with the duty of good faith, followed by irreparable harm, and then the issues with respect to paragraphs three and four of the injunction. [00:03:17] Speaker 00: The district court erred by relying upon what it described as a consensus rule. [00:03:23] Speaker 00: The courts may not imply a covenant not to exceed the scope of a patent license, [00:03:31] Speaker 00: unless the license includes a technology transfer. [00:03:35] Speaker 00: This was error because there is no consensus rule. [00:03:39] Speaker 00: The case law relied upon by the district court and by MACOM before this court applied a different legal standard, a different legal doctrine, than the one advanced by Infineon on appeal. [00:03:52] Speaker 00: The cases relied upon by MACOM and the district court concern implied in fact covenants. [00:03:59] Speaker 00: The duty of good faith and fair dealing, which is the subject of this appeal, is a covenant implied in law. [00:04:06] Speaker 00: And it is error to conflate the two doctrines. [00:04:10] Speaker 00: By calling it a consensus rule, the district court has conflated the two doctrines. [00:04:17] Speaker 00: These two doctrines are based upon different policy considerations and have different legal requirements. [00:04:24] Speaker 00: So it is error to blend them together [00:04:26] Speaker 00: rather than focusing on the legal requirements for each separately. [00:04:31] Speaker 00: There are some fundamental differences between these legal doctrines. [00:04:35] Speaker 00: First, implied in fact covenants may or may not exist in a particular case. [00:04:41] Speaker 00: The implied duty of good faith and fair dealing, however, and implied a law covenant exists by operation of law in every California contract. [00:04:54] Speaker 02: at page 33 of the Blue Breed, to look at a Supreme Court of Vermont decision from 1966, which is cited with approval by other courts, none of which is binding or instructional to our circuit, for the purpose of establishing that proposition that the duty is found in every contract. [00:05:22] Speaker 02: Couldn't you come up with something better? [00:05:24] Speaker 00: Well, Your Honor, this issue just doesn't arise very often. [00:05:28] Speaker 00: The implied duty of good faith? [00:05:30] Speaker 00: Well, the implied duty of good faith in this context. [00:05:33] Speaker 00: I think what is important about the Vermont decision is that the policy underlying the duty of good faith and fair dealing is the same in Vermont as it is in California. [00:05:46] Speaker 00: And so we submit that the California courts would treat the issue similarly. [00:05:51] Speaker 03: But just to be clear, [00:05:54] Speaker 03: You weren't able to find any California cases that address this issue. [00:05:59] Speaker 03: Is California state law that would apply? [00:06:01] Speaker 03: I understand your position that, you know, there are a number of cases that hint around this, some going one way, some going the other in various different jurisdictions. [00:06:10] Speaker 03: But what's your best case to support your position in California? [00:06:15] Speaker 00: Okay. [00:06:15] Speaker 00: We cited a district court case, a copyright case where the court recognized an implied obligation [00:06:23] Speaker 00: not to interfere with the copyright. [00:06:27] Speaker 00: But Your Honor, the best case in California really is the Carer case that lays out the standard for the duty of good faith and fair dealing. [00:06:41] Speaker 00: That case says that a party can't do something to interfere with the other party's rights to enjoy the benefits of the agreement [00:06:51] Speaker 00: considering the nature and purpose of the contract and the legitimate expectations of the parties. [00:06:56] Speaker 00: The Shaw case in Vermont found that the legitimate expectations of the parties when they enter into a license with a field of use limitation is that the licensed party will not go outside that field of use limitation. [00:07:14] Speaker 03: What are the things that distinguishes your case between some of the other cases [00:07:19] Speaker 03: that talk about this, including Shaw, is that in this situation, you're talking about JAN on SI, okay, silicon, right? [00:07:31] Speaker 03: And then it seems that that's what the license agreement is directed to. [00:07:34] Speaker 03: There's no mention at all of using the substrate silicon carbide. [00:07:40] Speaker 03: And so as far as the field of use goes, I mean, I think those other cases they're talking about, for example, [00:07:50] Speaker 03: you can use the technology in California but you can't use it in Maine or something like that. [00:07:58] Speaker 03: Whereas this, the field of use that you seem to be talking about, might be one that I can't even tell if it's actually within the license itself at all. [00:08:08] Speaker 03: Because it seems that the technology that the license is talking about is this silicon technology, not silicon carbide. [00:08:20] Speaker 00: Several responses, Your Honor. [00:08:22] Speaker 00: First of all, the field of use limitation in Shaw was regarding the size of the filaments. [00:08:29] Speaker 00: So it is similar in that there was a technological field of use limitation. [00:08:34] Speaker 00: The context of this transaction presents a stronger case for the violation of the duty of good faith and fair dealing. [00:08:45] Speaker 00: The context of this transaction is that [00:08:49] Speaker 00: Maycom's predecessor owned these patents. [00:08:53] Speaker 00: They were sold to Infineon's predecessor for nine million dollars with a carefully negotiated field of use licensing the technology back to Maycom in a limited field of use with ongoing obligations to cooperate in patent prosecution and enforcement. [00:09:17] Speaker 00: So the parties knew [00:09:20] Speaker 00: well what gallium nitride and silicon carbide was and what gallium nitride and silicon was and carefully limited the license to gallium nitride and silicon. [00:09:31] Speaker 00: The patents that are at issue in this case and that were licensed talk about both gallium nitride and silicon and gallium nitride and silicon carbide. [00:09:41] Speaker 00: So the parties were well aware of silicon carbide when they entered into this license agreement. [00:09:48] Speaker 05: I know you wanted to talk about this and irreparable harm, et cetera, but your time's running out. [00:09:53] Speaker 05: So let me turn to what I'd like you to talk about. [00:09:55] Speaker 05: What is the status of the injunction? [00:09:57] Speaker 05: What is the status of the case now before the district court? [00:10:00] Speaker 00: The status of the case before the district court is that discovery has begun. [00:10:05] Speaker 00: With respect to the injunction, there was a contempt motion that was filed, and we just had a hearing on contempt. [00:10:15] Speaker 00: that actually is relevant to one of the issues before the court, which is whether or not the injunction satisfies the requirements of Rule 65. [00:10:25] Speaker 00: And what about, there's no trial scheduled or anything of that on the merits? [00:10:31] Speaker 00: There is a trial scheduled, yes, Your Honor. [00:10:35] Speaker 00: I believe it is early 2019. [00:10:40] Speaker 05: So let me turn to 65 D, which was the issue I wanted to focus on. [00:10:44] Speaker 05: Your challenge is to paragraph 3, right? [00:10:48] Speaker 00: Yeah, paragraphs 3 and 4, Your Honor. [00:10:51] Speaker 05: Well, where's your challenge to paragraph 4? [00:10:54] Speaker 00: Well, the challenge is based upon the language about practicing the patents. [00:11:00] Speaker 00: That we're not allowed to do certain things, make, use, sell, et cetera, with regard to practicing the patents. [00:11:07] Speaker 05: I'm sorry, is that an answer to paragraph 4? [00:11:10] Speaker 00: No, the requirement about practicing the patents appears in paragraphs three and four. [00:11:18] Speaker 00: Our contention is that that language violates this court's prior decision, the IXYS case, which basically- I'm sorry. [00:11:29] Speaker 05: I'm not saying- I'm looking at paragraph four. [00:11:31] Speaker 05: What in paragraph four implicates? [00:11:37] Speaker 05: Because I didn't understand, I thought the challenge, the 65-D challenge was really the paragraph. [00:11:42] Speaker 00: The 65-D challenge focuses on paragraph three, which prohibits us from doing certain things and practicing the patents and doing those things. [00:11:52] Speaker 00: Right, right. [00:11:53] Speaker 05: So can you talk to us a little about your argument in that regard, because I think the other side makes the argument. [00:12:00] Speaker 05: got wrongful termination. [00:12:02] Speaker 05: If we assume that the district court was correct on her analysis of likelihood of success and irreparable harm, what's wrong with the injunction just incorporating the terms of the wrongfully terminated agreement and including the language there? [00:12:18] Speaker 00: Okay. [00:12:18] Speaker 00: Because this court's prior decisions have found that even after there has been claim construction, a trial on the merits before a jury [00:12:30] Speaker 00: and an adjudication of infringement of a discrete product, it violates Rule 65 to enjoin a party from infringing the patent going forward. [00:12:43] Speaker 00: Because there may be other disputes with a product that is not colorably different from the product that was tried. [00:12:49] Speaker 05: Is this a different kind of case, though? [00:12:51] Speaker 05: This is not a patent infringement case. [00:12:53] Speaker 05: None of this ensued this instruct. [00:12:56] Speaker 05: Isn't this a different kind of case? [00:13:00] Speaker 05: And therefore, should we be looking at our jurisprudence with regard to the scope of injunctions in infringement cases, or should we be looking to a different analysis given that this was a wrongful termination and all the district court is saying is, again, assuming that she's right on irreparable harm and likelihood of success, you've got to follow this contract. [00:13:23] Speaker 00: It's not a different kind of case in this sense. [00:13:25] Speaker 00: And in fact, this is worse than the typical kind of case. [00:13:28] Speaker 00: In the cases that this court has decided, there has been an adjudication, there has been claim construction, there is a product. [00:13:36] Speaker 00: Here, there are 39 patents, no adjudication about what any of the terms mean, and no product was analyzed. [00:13:44] Speaker 00: So essentially, we've been told, don't infringe any of these 39 patents, but I'm not going to tell you what the claims mean. [00:13:51] Speaker 00: And I think what happened with the contempt motion below, [00:13:54] Speaker 00: is perfect evidence that this was not a clear injunction under Rule 65. [00:14:00] Speaker 00: The court decided that to decide the contempt motion would require it to do claim construction and decided to postpone analyzing the contempt motion until it had done claim construction as well as until it had heard from this court. [00:14:16] Speaker 00: That is evidence that the injunction was vague. [00:14:18] Speaker 00: If the injunction set forth clearly what we were prohibited from doing, [00:14:22] Speaker 00: the court wouldn't need to do any claim construction to decide. [00:14:26] Speaker 05: Is this challenge that the injunction is vague or that it's just over-broad? [00:14:32] Speaker 00: Well, it doesn't clearly specify what we're prohibited from doing. [00:14:36] Speaker 00: That's the basis for this. [00:14:38] Speaker 01: Where is the vagueness argument raised in the brace? [00:14:42] Speaker 01: I certainly see your over-breath argument. [00:14:46] Speaker 00: Well, Your Honor, the violation of Rule 65 based upon this court's prior decision is that the injunction does not clearly prescribe the conduct which we are prohibited from doing. [00:14:57] Speaker 05: Well, I think maybe the analysis you're short-cutting is because it's not explicit enough, then it's therefore overbought. [00:15:08] Speaker 05: But in any event. [00:15:09] Speaker 05: Well, I'm year into your rebuttal, so why don't we move to the other side. [00:15:23] Speaker 04: Good morning. [00:15:24] Speaker 04: May it please the court, Amanda Tesser for Maycom and Nitronix. [00:15:30] Speaker 04: This appeal relates to Infineon's attempts to walk away from the promises that it made to Maycom and Nitronix in 2010. [00:15:36] Speaker 05: Can I just short circuit you to pick up where your friend left off? [00:15:41] Speaker 05: Because frankly, the 65D issue is the one that I'm struggling with the most. [00:15:46] Speaker 05: I only speak for myself. [00:15:48] Speaker 05: Absolutely. [00:15:48] Speaker 05: It does certainly seem to me that [00:15:53] Speaker 05: speaking contempt on the details that are included in paragraph three would clearly bump up against our precedent and would be arguably unworkable. [00:16:08] Speaker 05: So can you tell me why your argument for justifying the scope of this injunction? [00:16:16] Speaker 04: Absolutely. [00:16:17] Speaker 04: So as a starting point, remember that the district court in the Ninth Circuit [00:16:21] Speaker 04: has broad discretion to fashion equitable relief to remedy the irreparable harm. [00:16:28] Speaker 04: Here, I think you said it and you hit it right on when you said, isn't this a different type of case? [00:16:33] Speaker 04: This is a different type of case because this is a contract case. [00:16:37] Speaker 05: Yeah, I know. [00:16:37] Speaker 05: But if we're talking about contempt, couldn't infringement and breach of this implicate? [00:16:44] Speaker 05: We're talking about infringement. [00:16:46] Speaker 05: We're talking about not a breach of contract case necessarily. [00:16:50] Speaker 05: but really having to do the kind of analysis we do in our patent jurisprudence. [00:16:55] Speaker 04: And we agree and acknowledge that to prove contempt, we do have to show that they're practicing one of the patents. [00:17:03] Speaker 04: That being said, I think it's too high of a standard to require the district court to have laid out claim constructions for 39 patents. [00:17:12] Speaker 05: That may not be the solution to the problem. [00:17:18] Speaker 05: The solution to the problem may be that this is just overbroad at this stage of the case. [00:17:23] Speaker 04: We don't believe that it's overbroad. [00:17:24] Speaker 05: They couldn't possibly, even if you laid out every claim in the patents, if they come up with a new product tomorrow, that product could arguably be subject to contempt proceedings under this injunction, right? [00:17:37] Speaker 03: If it practices one of the patents. [00:17:39] Speaker 03: I think I asked a question relatedly [00:17:42] Speaker 03: It seems that you've shown a likelihood of success that your client didn't breach the contract, right? [00:17:48] Speaker 03: My client didn't breach the contract? [00:17:51] Speaker 03: There's a likelihood of success that there's been no breach and therefore Infinium must honor its obligations under the contract. [00:17:59] Speaker 03: That's what you showed, right? [00:18:00] Speaker 03: That's correct. [00:18:01] Speaker 03: Okay. [00:18:01] Speaker 03: That's what you showed likelihood of success on. [00:18:03] Speaker 03: Have you showed likelihood of success that they are infringing? [00:18:08] Speaker 03: No, we have not. [00:18:08] Speaker 03: No, you did not. [00:18:09] Speaker 03: So why does your injunction get to prevent them from infringing? [00:18:13] Speaker 04: It's because of the way the contract was drafted here. [00:18:16] Speaker 04: So they own these patents. [00:18:17] Speaker 04: There are three dozen patents that they have owned for the past seven years that they have been prosecuting, that they understand, that they wanted to own because everyone understands that these are foundational patents. [00:18:30] Speaker 04: Everybody understands, and it's within the context of the record, that there is [00:18:37] Speaker 04: no commercially feasible way to get around these patents. [00:18:40] Speaker 04: They haven't denied that. [00:18:42] Speaker 04: They contested that we haven't put in evidence on that point. [00:18:46] Speaker 04: And it's correct that we did not put in an expert report on that point. [00:18:51] Speaker 04: But they haven't actually affirmatively denied that. [00:18:54] Speaker 04: And in the context of the contempt proceedings, the- Can I just back me up for a minute? [00:18:58] Speaker 03: Yeah. [00:18:58] Speaker 03: I want to get you back to Judge Price's question, because I'm afraid I diverted you. [00:19:02] Speaker 03: So one thing is you mentioned that the district court has [00:19:07] Speaker 03: great discretion to have an injunction. [00:19:10] Speaker 03: I agree that there's discretion on whether to grant an injunction. [00:19:14] Speaker 03: But isn't compliance with Rule 65D reviewed de novo? [00:19:18] Speaker 04: That is correct, but I will also say that they haven't cited a single case in the context of contract law out of the Ninth Circuit or anywhere else that has said that this kind of injunction in a contract, a licensed case, is improper. [00:19:33] Speaker 04: They've only cited [00:19:34] Speaker 04: authority from the Federal Circuit that's arisen in the context of patent cases. [00:19:38] Speaker 04: And I think it's fundamentally different when you take- What's your best case on your side? [00:19:43] Speaker 04: I would say the best case on our side is probably the Boardman case, which is a case where the Ninth Circuit enjoined conduct that the enjoined party argued was actually allowed by a contract. [00:19:58] Speaker 04: But the court said, the Ninth Circuit said, that that conduct [00:20:02] Speaker 04: amount to effectively preparing to do something that was enjoyed. [00:20:08] Speaker 02: Let's talk about the elephant and the dancing hippopotami lining the back of the room, which is to say the next case. [00:20:16] Speaker 04: Yes. [00:20:17] Speaker 02: And leaving aside whether the court acted improperly because the matter was on appeal, the court took certain action. [00:20:30] Speaker 02: And if [00:20:32] Speaker 02: If we determined that that was properly before the court, what do you think about that action the court took, leaving aside the propriety of the court doing it, as opposed to us sending it back down and having it done over again? [00:20:48] Speaker 04: Setting aside the jurisdictional issue, we think... Let me say this. [00:20:53] Speaker 04: The parties have both said that Section 2.1 is unambiguous. [00:20:57] Speaker 04: We just read it very, very differently. [00:21:00] Speaker 04: And in California, the test is what they do is, we all read the case in the law school, the Pacific Gas and Electric case. [00:21:06] Speaker 04: What they do is the judge kind of takes a peek at the parole evidence to see if there's a latent ambiguity in the contractual provision, to see if there's something in it that would lend itself to a meaning that would be different than the plain and ordinary meaning of the words. [00:21:22] Speaker 04: And if the district court concludes that there is a latent ambiguity, then they admit the parole evidence and analyze it. [00:21:29] Speaker 04: Here, we submit that, setting aside those jurisdictional issues, if you get to the full record, we submit that the section 2.1 is unambiguous and that you cannot simply read out that language in the first sentence that talks about how the exclusive license is exclusive, including as against IR. [00:21:51] Speaker 04: And the reading that Infineon gives to section 2.1 completely eviscerates those words. [00:21:57] Speaker 04: The parties here, we think, pretty clearly knew how to spell it out specifically when IR was retaining some right. [00:22:05] Speaker 04: That's the beginning of the second sentence, where they say, notwithstanding the foregoing, IR retains the right under the license patents to design, develop, make, so forth in the field of use. [00:22:18] Speaker 04: So the suggestion that they would then immediately, in the second part of that sentence, take away rights by silence and not [00:22:27] Speaker 04: specifically say what IRA was retaining to us is not credible. [00:22:33] Speaker 04: And it can't be read that way. [00:22:34] Speaker 04: We read that second sentence about the notwithstanding part to clarify the somewhat unusual and what would otherwise be perhaps confusing relationship between the field of use and the exclusive field. [00:22:47] Speaker 04: And I think that we submitted a diagram, a graphic, on page 8 of our red brief. [00:22:53] Speaker 04: We read that language in the notwithstanding section as being designed to clarify that relationship between the blue, the ring, the donut that goes around that green exclusive field in the middle. [00:23:06] Speaker 05: The elephant I see is different than the elephant I see. [00:23:10] Speaker 05: So can I bring you back to paragraph three of the injunction? [00:23:14] Speaker 05: Absolutely. [00:23:15] Speaker 05: OK. [00:23:16] Speaker 05: I thought he was going to say what happens the next case, which was not your next case, but the next case that comes before the district court in contempt. [00:23:25] Speaker 05: You could be dealing with a product that isn't on the market yet. [00:23:28] Speaker 05: Some new product or design around goes on the market next month. [00:23:32] Speaker 05: And you say it infringes. [00:23:35] Speaker 05: It's one of the 35 patents. [00:23:37] Speaker 05: We don't know which one of them. [00:23:39] Speaker 05: And that is supposed to be adjudicated in the context of a contempt proceeding? [00:23:43] Speaker 05: Really? [00:23:44] Speaker 05: I mean, maybe you have an example of when that's happened before, but certainly in patent world, I don't recall ever seeing a kind of contempt proceeding that does that. [00:23:56] Speaker 05: And in fact, I think it's exactly that reason that results in our case law saying, no, no, no, no. [00:24:01] Speaker 05: This is not the way we run contempt here. [00:24:03] Speaker 04: So what I will say is that the order that we proposed to the court didn't include that language about practicing the nitronics patent. [00:24:10] Speaker 04: It's our view that you can't do game on silicon in a commercially feasible way without practicing them. [00:24:15] Speaker 04: Infineon asked that that language be added. [00:24:18] Speaker 04: And the court added it during that period of time last November when the parties were considering her proposal. [00:24:24] Speaker 05: I appreciate that, but that doesn't do me any good, because we're left here adjudicating. [00:24:29] Speaker 05: You are here defending paragraph 3, and they are here challenging paragraph 3. [00:24:35] Speaker 05: So that's what we're left with. [00:24:37] Speaker 04: Well, that's fair. [00:24:37] Speaker 04: But it's also fair to say that they asked for that language to be added. [00:24:41] Speaker 04: So now for them to challenge the injunction because they got what they wanted, [00:24:44] Speaker 04: puts us in a little bit of an untenable position. [00:24:47] Speaker 04: We would have preferred that that language not be there and that they be prohibited from operating in our exclusive field at all as a blanket statement. [00:24:57] Speaker 05: Oh, so this was a limiting, in that context of the fight we were having, that was limiting. [00:25:03] Speaker 05: But you're not suggesting that they waived their right to challenge the breadth of paragraph three in this injunction, right? [00:25:09] Speaker 04: No. [00:25:09] Speaker 04: No, we are not suggesting that. [00:25:13] Speaker 04: Did you want to hear about the Shaw case and the good faith and fair dealing? [00:25:20] Speaker ?: Sure. [00:25:22] Speaker 02: Did you look in the restatement? [00:25:24] Speaker 02: I'm just curious. [00:25:25] Speaker 04: Did we look? [00:25:26] Speaker 04: I'm sure we did. [00:25:28] Speaker 04: I don't recall what the answer was. [00:25:29] Speaker 04: I don't think there was anything particularly on point, although I don't remember off the top of my head. [00:25:35] Speaker 04: So I don't want to say that firmly. [00:25:38] Speaker 01: I seem to remember it being in there. [00:25:43] Speaker 04: Well, let me say this. [00:25:44] Speaker 04: There is a very well-developed body of case law in California about the covenant of good faith and fair dealing. [00:25:50] Speaker 04: And what everyone here agrees is that when you use the implied covenant of good faith and fair dealing, it has to be hinged on a particular contractual term. [00:26:01] Speaker 04: The point of the implied covenant of good faith and fair dealing is that the promises that you make have to be executed in good faith. [00:26:09] Speaker 04: So if I promise to one of you that I'll mow your lawn and you're gonna give me some money for it and I come in and I cut off a centimeter and you look at it and can't tell anything's been done, you can say, hey, you need to perform here. [00:26:21] Speaker 04: I've been deprived of the benefit of my bargain because we both understood that you were going to be mowing my lawn for real. [00:26:29] Speaker 04: You can't imply from the promise to mow the lawn that you're gonna do something else. [00:26:34] Speaker 04: You're gonna trim the trees or paint the garage. [00:26:37] Speaker 04: What has happened here in this case [00:26:39] Speaker 04: is that there's patent license. [00:26:41] Speaker 04: And at its core, a patent right is the right to exclude. [00:26:44] Speaker 04: That's 35 USC 154. [00:26:47] Speaker 04: And what a patent license is is the waiver of a right to sue. [00:26:52] Speaker 04: And so when I say to you, I license you to practice these patents, what I'm saying is, I won't sue you when you practice these patents. [00:27:01] Speaker 04: And when the promise is, I license you in the field of use only, and that's the new hinge that they've hooked onto, that was never argued below, [00:27:09] Speaker 04: There was nothing about the word only. [00:27:11] Speaker 04: It was the focus of the court's briefing or decision below. [00:27:14] Speaker 04: When I say, I promise not to sue you in the field of use only, that doesn't imply I'm not going to sue you when you operate outside the field of use. [00:27:23] Speaker 04: If anything, it implies the opposite. [00:27:27] Speaker 04: And here, when you look at the use of the word only within the context of section 2.1, it's actually used twice. [00:27:34] Speaker 04: IR says that they give a worldwide royalty-free exclusive license [00:27:39] Speaker 04: in the field of use only, and also in the exclusive field only. [00:27:44] Speaker 04: And I think when read in context and considered in the entirety of this somewhat confusing relationship that they were setting up with the different fields and the overlapping fields, I think it's pretty clear that the use of the word only there was designed to distinguish and point out and remind the reader, hey, we're talking about the field of use here in part A. Hey, we're talking about the exclusive field here in part B. [00:28:08] Speaker 03: Your adversary, I'm not even sure that this is particularly relevant, but I'm curious. [00:28:12] Speaker 03: Your adversary suggests that the patent portfolio covers not just silicon substrates, but also silicon carbide substrates. [00:28:20] Speaker 03: Do you agree? [00:28:21] Speaker 03: That the patents? [00:28:21] Speaker 03: The patent portfolio. [00:28:22] Speaker 04: The patent portfolio. [00:28:23] Speaker 04: I think there are some in the portfolio that can be read to cover it. [00:28:27] Speaker 04: I don't know off the top of my head if those had issued already as of 2010. [00:28:31] Speaker 04: They may or may not have. [00:28:33] Speaker 04: So I don't know that that was top of mind. [00:28:35] Speaker 04: What I will tell you was that [00:28:36] Speaker 04: The relationship between NITRONICS and IR for many years had involved the only Gannon Silicon. [00:28:42] Speaker 04: And that was the focus of the 2004 agreement and the 2010 agreement. [00:28:48] Speaker 04: The other thing that I would say is that thinking ahead to what would be the ramification of adopting their argument that it's a per se breach of the implied covenant of good faith and fair dealing every time you exceed the scope of a license, it is incredibly common for big companies to cross license [00:29:06] Speaker 04: other companies in a particular geography, to a particular part of their patent portfolio, to a particular field of use. [00:29:13] Speaker 04: When you have two big companies, Apple and Samsung, IBM and Dell, whoever it is, who have these cross licenses, all of a sudden, if somebody steps one step over the field of use, the geography or whatever it is that they're granted, [00:29:30] Speaker 04: All of a sudden, if that becomes grounds for termination because it's a breach of the implied covenant of good faith and fair dealing every time. [00:29:36] Speaker 03: And instead, it's your position that it's simply a patent infringement. [00:29:39] Speaker 04: Exactly. [00:29:40] Speaker 04: The patent laws provide a full remedy here. [00:29:44] Speaker 04: There's no reason to extend contract law in the way they're describing. [00:29:49] Speaker 04: They point to the Shaw case, which is obviously, as you recognize, a Vermont case from 1966. [00:29:55] Speaker 04: There have been a lot of cases since then. [00:29:57] Speaker 04: A lot would be a stretch. [00:29:58] Speaker 04: But there have been half a dozen cases since then that could easily have followed this implied covenant of good faith and fair dealing reasoning. [00:30:05] Speaker 04: None of them have. [00:30:06] Speaker 04: And you can say that the laws in disarray, but those cases really all hang together remarkably well. [00:30:13] Speaker 04: They all say, if there's an expressed negative covenant, you enforce it. [00:30:18] Speaker 04: There's not one here. [00:30:19] Speaker 04: They all say you can imply one in fact if there's been a technology transfer that has enabled the licensee to go beyond the scope. [00:30:29] Speaker 04: That's not here. [00:30:31] Speaker 04: And they're correct that Shaw is the only one that then has gone on to consider the implied covenant of good faith and fair dealing. [00:30:36] Speaker 04: But the other ones could have and didn't. [00:30:39] Speaker 04: And that would have been an easier path in some of them to the resolution that came out. [00:30:45] Speaker 04: And so I think that it's. [00:30:47] Speaker 04: Fair to say that this would be a substantial expansion of the law to adopt their argument. [00:30:53] Speaker 05: Your time has expired. [00:30:55] Speaker 04: OK. [00:30:56] Speaker 04: It says I have 30 seconds, but I will sit down. [00:30:57] Speaker 04: No, that's over the expired. [00:30:59] Speaker 04: Oh, sorry. [00:31:02] Speaker 04: Thank you. [00:31:02] Speaker 04: Thank you. [00:31:08] Speaker 00: So one thing on the injunction, Your Honor, because counsel said that we asked for the provision about the patents to be put in. [00:31:14] Speaker 00: Yeah, I was going to ask for clarification about that. [00:31:15] Speaker 00: That's like an inviting error argument, but they don't really make an inviting error argument. [00:31:20] Speaker 00: It would have been error not to include some limitation on the patents in the injunction, because what the district court was enjoining us from was violating the exclusive license provision, which required practice of the patents. [00:31:35] Speaker 00: So the broader injunction would have been an error. [00:31:38] Speaker 00: And in the same brief where we said you can't just enjoin us from practicing in the exclusive field because they even said we could do that as long as we didn't infringe the patents. [00:31:50] Speaker 00: So you can't just say we can't practice in the exclusive field. [00:31:53] Speaker 00: It has to be cabined to the patents. [00:31:56] Speaker 00: But we also argued in the same brief that that injunction still would violate Rule 65. [00:32:02] Speaker 00: because it prescribes us from practicing patents, and that violates the specificity requirement of Rule 65. [00:32:11] Speaker 03: Tonight, for clarification, are you saying that the injunction, the third paragraph, should be deleted in entirety, or should it be modified? [00:32:19] Speaker 00: It should be deleted in its entirety. [00:32:21] Speaker 00: That's what I thought you were saying. [00:32:22] Speaker 00: Yeah. [00:32:22] Speaker 00: What we had argued in the district court is that would have been an error to give an even broader injunction, because all the license agreement proscribes [00:32:31] Speaker 00: is violating their exclusive patent license. [00:32:34] Speaker 00: They wanted to say we couldn't sell products in the exclusive field whether they violated the patents or not. [00:32:42] Speaker 00: A couple responses to some points the Council raised on the duty of good faith and fair dealing. [00:32:47] Speaker 00: Not every state has the duty of good faith and fair dealing, number one. [00:32:52] Speaker 00: Number two, the parties here chose California law. [00:32:55] Speaker 00: California law in the duty of good faith and fair dealing and implied in law covenant [00:33:01] Speaker 00: looks more at fairness, fundamental fairness, and good faith than do other states. [00:33:08] Speaker 00: Yes, in these other cases, maybe the parties could have raised good faith and fair dealing, but they didn't. [00:33:14] Speaker 00: So those cases aren't really relevant to the question before the court. [00:33:18] Speaker 00: That's not the legal theory we are espousing. [00:33:20] Speaker 00: We are espousing the duty of good faith and fair dealing, which is an implied in law covenant. [00:33:27] Speaker 00: Second point I want to make is that the California case law, counsel referred to this textual hook argument. [00:33:33] Speaker 00: Two clarifying points there. [00:33:35] Speaker 00: Number one, the California law does not require the implied duty of good faith and fair dealing to violate a particular contractual provision. [00:33:45] Speaker 00: The Carrier case makes very clear that the obligations are imposed by law based upon the expectations of the parties [00:33:54] Speaker 00: due to the purpose of the contract, not particular provisions within the contract, the purpose of the contract overall. [00:34:01] Speaker 00: That is why Shaw found a violation for the same reason. [00:34:04] Speaker 00: The expectations of the parties were that the parties wouldn't go outside the field of use. [00:34:11] Speaker 00: The second point is the textual hook. [00:34:13] Speaker 00: They keep saying, well, this only argument that we're making is new on appeal. [00:34:18] Speaker 00: It is not new on appeal. [00:34:19] Speaker 00: What we argued below was that the text of the contract, which led to the violation of the duty and good faith and fair dealing, was the field of use limitation, which is the same basis that the Shaw court found the implied duty of good faith and fair dealing was violated under the same policy that California follows. [00:34:42] Speaker 00: So that was the basis for our argument, not the only. [00:34:45] Speaker 00: language in the contract. [00:34:47] Speaker 00: The only language is simply an additional argument in favor of our position which is perfectly acceptable under CCS Fitness. [00:34:55] Speaker 00: Thank you.